Search Results for: Federal Reserve

Fed’s Balance Sheet Skyrockets to $4.7 Trillion

Occupy Wall Street Protesters Outside the New York Fed (Thumbnail)

By Pam Martens and Russ Martens: March 19, 2020 ~ The Fed’s H.4.1 report was released at 4:30 p.m. today and it shows that the Federal Reserve’s balance sheet has skyrocketed to $4.7 trillion. It also shows that as of yesterday, its repo loans to the trading houses on Wall Street had soared to a total of $441.9 billion outstanding while borrowings from its Discount Window added another $28.2 billion, bringing the combined total to over $470 billion in loans outstanding. Wall Street has been receiving hundreds of billions of dollars a week in assistance from the Fed since September 17, 2019 while struggling Americans have yet to see a dime of assistance to help offset job losses from the coronavirus outbreak. The Fed doesn’t have to wait for a vote in Congress to funnel $9 trillion in cumulative loans to Wall Street. It can create an unlimited amount of … Continue reading

Wall Street’s Crisis Began Four Months Before the First Reported Death from Coronavirus in China; Here’s the Proof

New York Stock Exchange

By Pam Martens and Russ Martens: March 19, 2020 ~ U.S. Treasury Secretary Steve Mnuchin and Wall Street pundits are all over cable news, repeating the mantra that “this is nothing like the last financial crisis,” while seeking to lay the blame for all of the newly-announced bailout measures for Wall Street at the feet of the coronavirus. But in terms of Wall Street privatizing profits and socializing losses, this is exactly like the last financial crisis. Wall Street’s crisis has a specific launch date: September 17, 2019. That’s when the Fed, for the first time since the last financial crisis, began dumping hundreds of billions of dollars a week into Wall Street’s trading houses. That program, called “repo loans,” now tallies up to more than $9 trillion in cumulative loans made to Wall Street at super-cheap borrowing rates. The first article we wrote on that Fed program was dated … Continue reading

Fed Announces Program for Wall Street Banks to Pledge Plunging Stocks to Get Trillions in Loans at ¼ Percent Interest

Actress Louise Linton and Husband, U.S. Treasury Secretary Steve Mnuchin

By Pam Martens and Russ Martens: March 18, 2020 ~ The Federal Reserve Board of Governors announced at 6 P.M. last evening that it is following the direction of Steve Mnuchin, the former foreclosure king who now serves as U.S. Treasury Secretary, and authorizing the reinstatement of a hideously operated, multi-trillion dollar bailout program for Wall Street’s trading houses known as the Primary Dealer Credit Facility (PDCF). Veterans on Wall Street think of it as the cash-for-trash facility, where Wall Street’s toxic waste from a decade of irresponsible trading and lending, will be purged from the balance sheets of the Wall Street firms and handed over to the balance sheet of the Federal Reserve – just as it was during the last financial crisis on Wall Street. The Fed fought for years in court to keep the details of the PDCF and its sibling Wall Street bailout programs a secret … Continue reading

Here’s Why the Fed Hasn’t Yet Invoked Its 13(3) Emergency Powers to Stem a Stock Market Crash

Stock Price Chart of Citigroup Versus Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley Since February 14, 2020

By Pam Martens and Russ Martens: March 17, 2020 ~ The U.S. stock market set new records yesterday – all of them bad. The Dow Jones Industrial Average suffered its worst point loss in history, closing down 2,997 points at 20,188.52, which effectively erases all of its gains in the last three years. On January 20, 2017, when Donald Trump was sworn in as President, the Dow closed at 19,827. It’s now grown by just 1.8 percent in total over that span of time. The Dow also had its second worst percentage loss in history yesterday, losing 12.93 percent. That loss is only exceeded by Black Monday, October 19, 1987, when the Dow lost 22.6 percent. It barely beats out October 28, 1929 when the Dow lost 12.8 percent and ushered in what would become the worst stock market crash in history. From late 1929 to 1933 the stock market … Continue reading

The Fed Tried to Give Away $1 Trillion to Wall Street Today and Failed, Suggesting Specific Banks Are In Trouble

By Pam Martens and Russ Martens: March 16, 2020 ~

What is the world coming to when the New York Fed can’t mix up $1 trillion of almost-free money in its punch bowl and get the mega Wall Street banks to drink freely?

The New York Fed handed out $129.60 billion this morning at an average interest rate of 0.112. That was for a one-day loan to one or more of Wall Street’s trading firms. The specific names of which firms are doing the borrowing are a closely-guarded secret at the Fed – just as they were during the financial crisis in 2008 until media lawsuits and a legislative amendment forced the banks’ names out into the open. All that the public is allowed to know today is that any of the Fed’s 24 primary dealers (Wall Street trading houses) are allowed to borrow from the facility. (See list below.)

The New York Fed also offered $500 billion in a 28-day loan this morning and, stunningly, it only had offers for $18.45 billion of the $500 billion, which was loaned at an average interest rate of 0.151 percent.

Despite that poor showing at its money spigot party this morning, the New York Fed made a surprise announcement and said it was throwing another money giveaway of $500 billion at 1:30 p.m. today. Again, only takers for $19.40 billion of the $500 billion showed up. The loans were made at the incredibly low average interest rate of 0.102 percent.

There was this same lack of demand last Thursday and Friday when the Fed tried to give away, almost for free, $1.5 trillion over the two-day span.

What could possibly account for this lack of greed from the typical pigs at the trough?

The reason that jumps to mind to anyone who has been following the Fed’s money spigot closely, is that there are only a handful of Wall Street banks that are in desperate need of this cash. Since the beginning of this program last fall, the New York Fed has imposed caps on how much any one of the 24 Wall Street firms could borrow at each offering. It refers to this limit as a “proposition.”

So, for example, on the latest $500 billion loans, firms can make a “proposition” up to $20 billion on loans backed by U.S. Treasury collateral and up to $20 billion on loans backed by government-backed mortgage securities. It’s not clear if the Fed would provide an individual bank with a total of $40 billion on that specific loan or just $20 billion for both propositions.

It’s also not clear if the Fed has, without the public’s knowledge, imposed an overall cap on how much any one bank can borrow within a specific period of time.

But what today’s unscheduled afternoon loan operation suggests is that a bank that borrowed last Thursday or Friday or this morning, may have been in need of more assistance this afternoon.

We looked at how the Fed’s primary dealers were trading today to see which banks were showing the most distress. At approximately 2:30 today, these banks were showing large percentage declines on the day: Citigroup was down a scary 18.24 percent; Morgan Stanley was down 14.35 percent; Bank of America was down 14.38 percent; and JPMorgan Chase was down 13.64 percent.

Deutsche Bank had earlier in the day traded at a new all-time low of $4.99 before bouncing back to $5.39 for a percentage decline of 9.67 percent. That leaves the bank with just $11.5 billion in common equity capital versus tens of trillions of dollars (notional) in derivatives exposure.

Federal Reserve's 24 Primary Dealers as of October 7, 2019 (Source -- Federal Reserve Bank of New York)

Federal Reserve’s 24 Primary Dealers (Source: Federal Reserve Bank of New York)

The Fed Has Pumped $9 Trillion into Wall Street Over the Past Six Months, But Mnuchin Says “This Isn’t Like the Financial Crisis”

U.S. Treasury Secretary Steve Mnuchin (Thumb Print)

By Pam Martens and Russ Martens: March 14, 2020 ~ On February 12, 2020, the Dow Jones Industrial Average closed at 29,551.42. Yesterday, March 13, the Dow closed at 23,185.62 -– a loss of 6,365.80 points in one month’s time, or 21.54 percent. In 2008, the greatest financial calamity since the Great Depression, the Dow had lost 2,339.60 points or 21.4 percent one month after the frightening events of September 15, 2008 when Lehman Brothers filed bankruptcy, Merrill Lynch had to be taken over by Bank of America, and one day before the U.S. government seized the giant insurer, AIG, because it couldn’t pay the tens of billions of dollars in derivative bets it had made with the mega banks on Wall Street. On this past Friday morning, in what appeared to be an effort to restore confidence on Wall Street, U.S. Treasury Secretary Steve Mnuchin gave an interview on … Continue reading

The Fed Has 233 Secret Documents about JPMorgan’s Potential Role in the Repo Loan Crisis

Jerome Powell, Chairman of the Federal Reserve

By Pam Martens and Russ Martens: March 13, 2020 ~ The Federal Reserve Board of Governors has acknowledged to Wall Street On Parade that it has 233 documents that might shed some light on why JPMorgan Chase was allowed by the Fed to draw down $158 billion of the reserves it held at the Fed last year, creating a liquidity crisis in the overnight loan market according to sources on Wall Street. After taking four months to respond to what should have been a 20-business day turnaround on our Freedom of Information Act request, the Federal Reserve denied our FOIA in its entirety. (Our earlier request to the New York Fed resulted in the same kind of stonewalling. See The New York Fed Is Keeping JPMorgan’s Secrets Close to Its Chest.) The Wall Street liquidity crisis forced the Federal Reserve, beginning on September 17 of last year, to begin making … Continue reading

Another Dangerous Virus Hits the U.S. – Wall Street Bank Contagion

S&P 500 Index Versus Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan Chase and Citigroup, Feb 1 through March 11, 2020

By Pam Martens and Russ Martens: March 12, 2020 ~ There has been a lot of delusional talk about the strong capital levels of the mega banks on Wall Street, not only from the Federal Reserve, but also from Wall Street analysts spreading fantasies about the banks on cable news programs. We took an afternoon off last Friday to hear what was being said about the banks on CNBC. We were stunned to hear Mike Mayo, a long-tenured bank analyst on Wall Street, who currently works for Wells Fargo Securities, deliver a huckster-like assessment of the mega Wall Street banks. Mayo said this: “The banking industry has the strongest balance sheet in a generation. Now think about this: the banks have added $1 trillion of additional capital – that’s $1 trillion with a T; $2 trillion of additional cash; $3 trillion of additional deposits. You have a Federal Reserve stress … Continue reading

There Was a Bloodbath in Wall Street Banks and Insurers Yesterday

By Pam Martens and Russ Martens: March 10, 2020 ~ President Donald Trump is bringing a pea shooter to a gunfight. If you look carefully at the charts on this page from yesterday’s trading bloodbath, it’s clear that there is a deep financial crisis playing out. The idea that this can be remedied with a payroll tax cut is the stuff of tooth fairies. And this crisis didn’t begin with the coronavirus. Headlines about the virus did not start appearing in the U.S. until January of this year. But the Federal Reserve began making hundreds of billions of dollars each week in cheap loans to Wall Street’s banks on September 17, 2019 — the first time it had done this since the 2008 financial crisis. You can earmark September 17, 2019 as the actual date that this Financial Crisis II got underway. All of the toothless financial reforms of the … Continue reading

What’s the End Game in the Saudi Oil Price War?

Oil Rig

By Pam Martens: March 9, 2020 ~ In early afternoon trading, West Texas Intermediate, the domestic crude oil in the U.S., had lost over 20 percent on the day, 39 percent in the last 18 calendar days and 48 percent from its peak this year. The panic selling resulted from a failed OPEC meeting with its allies last week when Russia refused to go along with crude oil production cuts proposed by OPEC to shore up the price of crude. Following the failed meeting, Saudi Arabia began to dramatically discount its oil prices to customers to grab market share. It reminded me of an earlier Saudi oil price war in 1986 – without the coronavirus to add to the panic. In 1986 I was working at Shearson with newly acquired stock and commodity licenses. I had the good fortune of sitting next to a very savvy female oil trader who … Continue reading